The chart is the price trend of the Russell 2000 Index, which is a small-cap stock market index compared to the S&P 500, the stock market index based on the market capitalizations of 500 large companies. Small-cap stocks have been lagging over the past year.

Smaller stocks lagging behind larger companies is more typical in the late stage of a bull market and economic expansion.

Looking back over three years, we see smaller stocks were leading on the upside during the uptrend. That hasn’t been the case recently.

This divergence may be an early sign of a regime change.

Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Global Tactical.

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